Judge Edgardo Ramos of the New York Southern District Court has signed an order to stay the CFTC lawsuit against Celsius Network and Alexander Mashinsky.

The order, issued on September 19, 2023, follows a motion by the US Government to intervene in the CFTC action. The Government sought to stay the matter in its entirety in light of the pendency of the parallel criminal action United States v. Mashinsky, et al., in which an indictment has been returned.

Alexander Mashinsky has consented to the stay of this matter in its entirety. The CFTC did not object to the Government’s request to stay this matter in its entirety.

The CFTC launched its action against Mashinsky and Celsius Network, LLC in July 2022.

The complaint charges the defendants with fraud and material misrepresentations in connection with the operation of its digital asset-based finance platform, which falsely touted high profits and security to induce customers to deposit their digital asset commodities on the platform.

The complaint also alleges Celsius acted as an unregistered commodity pool operator (CPO) and Mashinsky operated as an unregistered associated person (AP) of a CPO. The CFTC and Celsius agreed to resolve the complaint against the company by imposing a permanent injunction prohibiting future violations of the Commodity Exchange Act (CEA).

The complaint alleges that from 2018 through June 2022, Mashinsky and Celsius engaged in a scheme to defraud hundreds of thousands of customers by mispresenting the safety and profitability of its digital asset-based finance platform.

Mashinsky and Celsius, via publicly available videos, blog posts, livestreams, and postings on social media and their website, touted Celsius as a “safe” alternative for customers’ digital asset commodities, similar to a traditional bank. Mashinsky and Celsius not only promised customers their deposited digital asset commodities would be safe with Celsius, but also promised customers high yield interest payments on the deposits.

To generate income to pay its customers the promised interest rates, customers’ digital asset commodities were pooled and deployed by Celsius as loans to institutional and retail customers and for other revenue generating activities, including, but not limited to, the trading of futures contracts. For this trading, Celsius operated the Celsius Pool, but was not a registered CPO.

Additionally, Mashinsky did not register as an AP of a CPO, despite soliciting members of the general public to contribute to the Celsius Pool. Based on the false promises of the safety of Celsius’ operation and receipt of high interest rate payments, customers deposited approximately $20 billion with Celsius.

However, instead of engaging in “safe” investments, Mashinsky and Celsius engaged in increasingly risky trading strategies when they were unable to make customers’ interest payments. Despite claims by Mashinsky in May 2022 that Celsius had billions of dollars in liquidity and could meet customer withdrawal requests, on June 12, 2022, Celsius froze customer withdrawals.

In July 2022, Celsius filed for bankruptcy, revealing that its liabilities exceeded its assets by more than one billion dollars.